FQHC Look-Alike Strategy Helps Health System Target $10.7M in Added Reimbursement

Background

A regional health system in the Midwest has long been committed to improving care for underserved populations. Facing industry-wide challenges such as declining reimbursements and increasing pressure on emergency departments, the health system sought a way to provide sustainable, high-quality care while expanding access to the growing underinsured and uninsured populations.

The Challenge

Like many health systems, the organization was heavily subsidizing its primary care practices, which, taken as a whole, were operating at a financial loss. It faced increasing strain on resources due to growing demand and reduced government reimbursements.

The Solution

While leadership initially engaged KSM to discuss fair market value and compensation planning, the conversation evolved into a deeper strategic dialogue. KSM introduced the firm’s Federally Qualified Health Center (FQHC) Look-Alike strategy, which is a federal designation that helps providers improve access and expand services through enhanced Medicaid and Medicare reimbursement, participation in the 340B drug pricing program, and eligibility for federal workforce support. It also encourages community alignment by requiring a patient-majority board. When thoughtfully applied in the right setting, this model offers a path to improving care delivery while enhancing financial stability.

KSM guided the health system through a comprehensive feasibility assessment, starting with a deep analysis of six key buckets of need indicators, including emergency department utilization rates, social determinants of health, access to primary care, and Medicaid population data. The findings revealed a significant opportunity: the system could pursue FQHC Look-Alike status.

The KSM team evaluated the system’s existing primary care footprint, matching clinical locations against areas of high need. With the alignment confirmed and no substantial overlap or conflict with existing FQHCs in the area, KSM helped the organization move forward confidently. Importantly, leadership was reassured that the FQHC Look-Alike model was not a competitive threat to local safety net providers but rather a complementary approach that could strengthen community ties.

A rigorous financial analysis projected a reimbursement increase of approximately $10.7 million per year. The system also gained the ability to participate in the 340B drug pricing program, unlocking the potential for further revenue increases and expanding patient support services without increasing operational burden.

The Result

The organization is now well into implementation, guided by KSM through the operational, financial, and regulatory intricacies of standing up a compliant and effective FQHC Look-Alike entity. The board has begun meeting regularly in alignment with federal governance requirements, and the organization is actively working toward full operational status.

The anticipated financial increase is more than just a balance sheet win. For this health system, it means sustaining and growing services – potentially adding behavioral health, dietitians, and social workers – to better serve a vulnerable population. It also provides financial breathing room to support a newly built, state-of-the-art hospital and to reinvest in the community’s health for years to come.

Ready to explore whether the FQHC Look-Alike strategy could benefit your organization?

Whether you’re a health system, physician group, or community-based provider, KSM can help you evaluate the opportunity, navigate the application process, and implement a compliant, sustainable FQHC Look-Alike model. Complete the form below to learn more about how this strategy can strengthen care delivery, expand access, and improve long-term financial performance.